Question: Due to erratic sales of its sole product a disposable pocket camera Markline Company has been experiencing difficulty for some time. The Company's contribution format income statement for the most recent month is given below:
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Sales (30,000 units x $20.00 per unit)
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$600,000
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Variable Expenses
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360,000
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Contribution Margin
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240,000
|
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Fixed Expenses
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250,000
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Net Operating Loss
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$(10,000)
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1. Compute the company's CM ratio and its break-even point in both units and dollars. Explain what CM ratio and break-even means.
2. Explain margin of safety and operating leverage. How would these apply to question 1.